SPLEEN is the personal blog of Stephen Judd

All posts tagged "mining"

One of the arguments for opening up the conservation estate to mining is that it will provide tax revenue to the goverment. Heartless conversationists don't care, you see, that they are denying precious funds to our schools and hospitals, which would doubtless flow if only public spirited miners were allowed to dig up the landscape and pay income tax on their well-deserved profit. So we should remember how mining actually works.

Firstly, most mining ventures fail before becoming profitable. They dig holes, they look for ore, and they may not find it, or they find it, but it does not yield enough, or it yields enough, but it turns out that there is not enough ore to repay the owners' investment. Companies that never make a profit never pay income tax (although in fairness they will pay GST on goods and services). Incidentally, this is a problem environmentally since failed companies don't generally put cleaning up after themselves high on their list. Mining investors essentially hope that if they invest in 10 mining ventures, one of them will pay off big enough to compensate for the other nine that spend all their capital and return nothing.

This is not a rort, by the way. It makes sense that if you spend heaps and heaps over years, making a loss, that the first few years' notional profit doesn't really count, as it merely starts to recoup the earlier losses, so taxing it can be seen as unfair. But nonetheless, this is how mining usually operates.

So new mining operations will not be adding income tax revenue to the government for years. Most of them never will. People who claim that tax revenue to the government justifies mining conservation land really need to lay out the underlying assumptions for their claims in some detail before we should take them seriously.